The backing pool, in plain English.

Before the detail

Where these words come from.

The FCA published PS26/10, Crypto Regime: Stablecoin issuance in June 2026. The policy statement is the regulator explaining its final policy in its own words. That is useful, but it is not the law. The law sits at Appendix 1 of the same document, which binds in the made instruments after the narrative ends.

This page is written from those made instruments. Two are bound into PS26/10: FCA 2026/35, the Glossary (Cryptoassets) Instrument 2026, and FCA 2026/36, the Cryptoassets (Stablecoins) Instrument 2026. Annex A of FCA 2026/36 inserts a new chapter 16 into the Client Assets sourcebook, headed “Stablecoin backing assets”, immediately after CASS 15. Annex B of the same instrument makes a new sourcebook, CRYPTO. Both come into force on 25 October 2027.

One naming point worth having, because it costs time. CASS 16 is not made by the Cryptoassets (Safeguarding) Instrument 2026. That is a separate instrument, the eighth of eleven in the same commencement sequence, and it is not reproduced in PS26/10. Anyone searching for the backing-pool rules under “safeguarding” will be looking in the wrong instrument. We have not read the Safeguarding instrument and nothing on this page is drawn from it.

What must be held

Full backing, and an arithmetic definition of what counts.

The core obligation is at CASS 16.2.1R. At all times, and separately for each qualifying stablecoin product, the value of the backing asset pool must equal “the reference value of the qualifying stablecoins in that qualifying stablecoin product multiplied by the relevant stablecoin pool”. The pool must be segregated from the firm’s own money and from every other backing asset pool, and at least 5% of it must sit in on-demand deposits.

The number of tokens you must back is not simply the number you have minted. CASS 16.2.8R sets it out as a formula, and the formula is the part most worth copying into a control document:

Two consequences follow that are easy to miss. Burning is what removes a token from the pool, so tokens an issuer holds itself still have to be backed until they are burned. And the count reaches backwards: CASS 16.2.9G confirms that the calculation includes stablecoins minted or burned “at any point, including before 25 October 2027”. A firm that has been issuing before the regime starts does not get a clean opening balance.

Currency is settled and it is narrow. CASS 16.2.14R requires a firm to hold all money and assets in the pool “in the denominated reference currency of the qualifying stablecoin product”. A sterling coin is backed in sterling. Electronic money may not be held in a backing asset pool at all, under CASS 16.2.2R.

The composition tests

Two requirements that share a number and are not the same test.

Two separate five per cent figures sit in the composition rules, and confusing them is the single easiest mistake to make in this chapter.

The on-demand deposit requirement

CASS 16.2.1R(4) requires a firm to hold “at least 5% of the backing asset pool in on-demand deposits”, and names that the on-demand deposit requirement, or ODDR. Note the scope. This sits in the rule that applies to every firm issuing a qualifying stablecoin, not only to firms using a wider set of assets. The account it sits in must be a backing funds account provided by a central bank, a CRD credit institution or an approved bank, under CASS 16.2.3R. Accounts provided by the Bank of England are exempt from the acknowledgement-letter requirement, under CASS 16.7.3R(2).

The core backing asset requirement

The second test has a narrower scope, and the scoping rule is explicit. CASS 16.1.3R applies CASS 16.2.17R to CASS 16.2.31R only to a firm “that holds expanded backing assets in a backing asset pool”. For those firms, CASS 16.2.28R sets a core backing asset requirement, or CBAR, as the higher of:

The second limb matters commercially. A new product does not have 180 redemption days, and the rule says what to do in that case rather than leaving it open. The measure itself is defined at CASS 16.2.29R as the value of completed redemptions on a given redemption day expressed as a percentage of the value of the backing asset pool on that same day.

How the two combine

This is the part to get right, and the made rule is blunter than any summary of it. CASS 16.2.25R requires that the percentage of core backing assets in the pool is “at least equal to the sum of the on-demand deposit requirement and the core backing asset requirement”. That sum is named the backing asset composition requirement, or BACR. CASS 16.2.27R says the same thing from the other side: the CBAR is held “in addition to the on-demand deposit requirement”.

They add. They do not overlap. For an issuer holding expanded backing assets, the floor is therefore ten per cent of the pool in core backing assets, of which at least five points must be on-demand deposits — and more than ten if the redemption history pushes the CBAR above its 5% floor. An issuer holding exactly 5% in on-demand deposits and relying on that alone has satisfied one requirement, not both.

CASS 16.2.26R requires the BACR to be calculated “every redemption day”. An issuer that breaches CASS 16.2.17R must notify the FCA promptly under CASS 16.2.30R, with one carve-out at CASS 16.2.31R: no notice is needed where the failure arises from a need to rebalance following a new BACR calculation and less than one business day has elapsed. That is a deliberate and narrow grace period, not a general tolerance.

The term everything hangs on

A redemption day is something the firm declares.

“Redemption day” carries the 180-day window, the CBAR lookback and the BACR calculation cadence. It is worth knowing where it comes from, because it is not a calendar the FCA publishes. CASS 16.2.17R(1)(b) requires the firm’s liquidity risk management policy to contain “a clear statement of which days of the year will be redemption days and which will not”.

The firm sets it, in a document its governing body has to approve under CASS 16.2.23R. That makes the liquidity policy a load-bearing document rather than a narrative one: the denominator of a capital-like test is defined inside it.

A precise note on sourcing. CASS 16 italicises “redemption day” as a defined term, but the Glossary instrument bound into PS26/10 does not add it: the alphabetical run in FCA 2026/35 goes from “redemption” straight to “regulated activity”. The definition is therefore made somewhere we have not read, elsewhere in the eleven-instrument series. We say so rather than guess at it.

Whose assets they are

A statutory trust, one per product, with one term left blank.

CASS 16.5.2R provides that, separately for each qualifying stablecoin product, a firm “holds as trustee money and assets which comprise the backing asset pool”. CASS 16.5.1G confirms that this “creates a fiduciary relationship between a firm and the holders of a qualifying stablecoin”. Each holder’s proprietary claim is the reference value of the stablecoins they hold, under CASS 16.5.4R(2). As trustee, the firm may not borrow or lend the trust property, save for repurchase transactions and placing money into a backing funds account, under CASS 16.5.5R.

One piece of the picture is not merely unfinished but visibly unfinished. CASS 16.5.4R lists the terms on which the firm holds the property, and its third limb reads, in the made instrument, “[to follow]”. An editor’s note attached to it states that rules on the terms applying “in the event of failure of the firm will be consulted on via a subsequent consultation”.

That is worth stating plainly. The insolvency waterfall for a failed UK stablecoin issuer is a square bracket in the made rules. A firm can build every control on this page and still not know what happens to its pool on the day it fails.

Who may hold them

Twenty per cent to the family, and it is not only about custodians.

CASS 16.6.8R caps intragroup concentration. Where a firm holds “any money or assets in a backing asset pool with one or more persons in the same group”, it “must not hold more than a total of 20% of the value of the backing asset pool with all such persons”.

Read the trigger, not the headline. The policy statement describes this as a limit on intragroup custodians, and much of the commentary has followed that word. The rule as made is wider: it bites on money as well as assets, and on any group person, so a group bank holding the on-demand deposits counts towards the same 20% as a group custodian holding the securities. An issuer inside a banking group can reach the cap without appointing a group custodian at all.

There is an escape and it is structured. CASS 16.6.9R(1) disapplies the cap where, following an assessment, the firm considers it can demonstrate compliance would be disproportionate because of three named things: “(a) the low value of the backing asset pool; (b) the nature, scale and complexity of its business; and (c) the safety offered by the persons”. That third limb refers back to the group persons themselves — it is about the safety of the family, not of the third parties the firm might otherwise have used.

Two notification duties travel with it, under CASS 16.6.11R. The firm must give notice “before it starts relying” on the exemption, and must give notice “promptly” whenever it decides to continue relying on it after a review. CASS 16.6.10G indicates a review should happen on a change of circumstances or, failing that, at least once a year. An exemption record that cannot evidence all three limbs and both notices is not evidencing the exemption.

A second 20% figure appears in the disclosure rules and is an unrelated test. One is a concentration cap on the group. The other is a publication trigger on any custodian. They share a number and nothing else.

How often it is counted

Two reconciliations, every business day, both ways.

The daily obligations are two, not one, and CASS 16.4 keeps them separate.

1. Internal, daily

   CASS 16.4.9R: carried out “as regularly as necessary and at least once each business day”, based on the most up-to-date records of the firm. It compares what the firm safeguards in the pool with what it should safeguard, under CASS 16.4.7R.

2. External, daily

   CASS 16.4.12R: same cadence, comparing the firm’s internal records with the statement or confirmation issued by each person holding a backing funds account or backing assets account, under CASS 16.4.13R.

One detail in the internal reconciliation is a trap for anyone automating it. CASS 16.4.8R requires the firm to use “the values contained in its internal records, and not records provided by third parties”. The internal reconciliation is not allowed to reach for the custodian’s number, even when the custodian’s number is better. That is the whole point of running two.

The records behind them are specified more widely than a balance. CASS 16.4.4R requires accurate records of the value that should be held, the location of the money and assets, the identity of those providing the accounts, and the value actually held. CASS 16.4.5R requires, for each reconciliation, a record of the time and date, the actions taken, the outcome including any discrepancies, and the value of any excess retained. Records are kept for five years under CASS 16.4.6R.

Valuation is specified too, which answers a question the policy statement leaves open. CASS 16.2.6R requires the firm to use market value, or where none is available “an alternative measure of fair value, which may include an estimated value calculated on a best-efforts basis”; to base calculations “on its records at the close of business on the previous business day”; and to record the method used. There is the price source, the cut-off and the audit trail, in one rule.

When the two sides disagree

Same day, keyed to the moment you find out.

CASS 16.4.18R sets the deadline: resolution “must be carried out as soon as possible, and in any event no later than the end of the business day on which the firm becomes aware of the discrepancy”. Two things in that sentence do work. It is promptness and a longstop, not one or the other. And the clock starts on awareness, not on the reconciliation run, so a break found by other means starts it too.

The resolution itself has two routes, under CASS 16.4.15R. The firm adjusts the pool — paying in a shortfall or withdrawing an excess — or it adjusts the stablecoin pool, by burning tokens that are not represented by assets, or minting tokens against an excess of value. That second route is the one people forget exists.

The permitted excess, and its denominator

CASS 16.4.16R lets a firm retain a limited excess after an internal reconciliation. The rule applies to “that part of the excess with a value of up to 5% of the relevant reference value multiplied by the relevant stablecoin pool”, and the firm may withdraw none, some or all of it, or retain none, some or all of it.

That base is worth being exact about, because the natural reading of the phrase “the value of the stablecoin pool” misleads. Reference value multiplied by the stablecoin pool is precisely the amount CASS 16.2.1R(3) says the backing asset pool must equal. So the permitted excess is measured against the required pool value — the same base as the composition tests, not a different one.

Two conditions travel with a retained excess. It sits inside the pool and is therefore held on trust under CASS 16.5.2R, per CASS 16.4.17G. And it is ignored when calculating what should be in the pool for the next internal reconciliation, under CASS 16.4.8R(1), so it cannot quietly become the new baseline.

The timing-difference exception

There is a carve-out in the external reconciliation rules that a control framework has to represent, and it is easy to read past. CASS 16.4.21R requires the firm to investigate and resolve an external discrepancy “without undue delay unless the discrepancy arises solely as a result of timing differences between the accounting systems of the person providing the statement or confirmation and that of the firm”.

So a pure settlement-timing break against a custodian’s statement is treated differently from a shortfall in the pool. The two must be distinguishable in the record, because one is a resolvable discrepancy and the other is not a discrepancy at all in the sense the rule means. A system that classifies every external break the same way will either over-report or miss the ones that matter.

Notification is separate again. CASS 16.4.22R requires written notice to the FCA without delay across six triggers, including being unable to conduct either reconciliation, being unable to adjust the pool, and becoming aware that at any time in the preceding twelve months the pool value was materially different from what it should have been.

Getting the money back

T+1, and the instrument says which instant it means.

CRYPTO 2.4.5R requires a firm to redeem “at any time on receipt of a valid redemption request”. CRYPTO 2.4.14R sets the terms: redemption must be completed at the value of the redemption sum, in money denominated in the reference currency unless the holder asks otherwise, and “as soon as practicable but no later than the end of the business day following the day on which the qualifying stablecoin is received”.

The clock therefore starts on receipt of the token, not on receipt of the request. That is the change the FCA made after consultation, and its practical effect is that anti-money-laundering checks sit before the window rather than inside it.

The consultation left open whether T+1 tests the placing of a payment or its settlement. The made rules choose. CRYPTO 2.4.18R: a redemption “is completed when a payment order instructing the transfer of the redemption sum from the firm to the holder has been made”. CRYPTO 2.4.19R gives the one exception — where the firm itself operates the holder’s payment account and credits it directly, completion is the moment of credit. Placement, then, except where no placement is needed.

The carve-out has three limbs, not one

CRYPTO 2.4.20R disapplies the T+1 time limit in three separate cases, and a system that only models the first will misreport the other two.

1. Legal prohibition

   Where completing in time would breach “any legal requirement or court order, including those contained in or made under the Terrorism Act 2000, the Proceeds of Crime Act 2002 or the Money Laundering Regulations”. Wider than money laundering alone.

2. Currency conversion

   Where all three of the following are met: the holder asks for a currency other than the reference currency; that exchange takes longer; and the firm made the likely timeframe clear when the holder enquired. Miss the third and the exception is unavailable.

3. Suspension

   Where redemption is suspended under CRYPTO 2.4.24R, which is itself a three-condition test involving an exceptional circumstance, exhaustion of alternatives, and a reasoned conclusion that suspension is necessary.

Three more rules round out the picture. CRYPTO 2.4.8R forbids any minimum redemption quantity, or conditions “which are onerous or difficult for a holder to meet”. CRYPTO 2.4.21R requires redemptions to be completed in an order based on “fair and objective criteria” which does not prejudice any particular type of holder. And CRYPTO 2.4.22R requires a returned stablecoin to be either recorded as part of the stablecoin pool or burned within 24 hours — which is the same 24 hours that the C term in the CASS 16.2.8R formula measures.

One line settles a question people ask about stressed markets. CRYPTO 2.4.15G states that for the purpose of calculating the redemption sum, “the value of the backing asset pool is irrelevant”. The holder redeems at reference value whatever has happened to the assets.

Who keeps the interest

The issuer keeps it, and the test is time.

CASS 16.2.13R is explicit that a firm “may keep interest or income accruing from a backing asset pool for its own account”, provided it does so in accordance with CASS 16.4 and its other obligations. The economics of the product sit there.

What the issuer may not do is pay it to holders. CASS 16.2.12R(1) prohibits a firm from paying interest or income to a holder “directly or indirectly”. The important refinement is in the second limb: interest or income “includes any incentive the provision or amount of which is connected to the length of time for which a person is the holder of a qualifying stablecoin”.

So the test is not whether a payment is called interest. It is whether it is connected to holding period. CASS 16.2.12R(3) then permits benefits that are unconnected to holding time, provided they meet conditions set out in paragraph 3A of the Schedule to the Collective Investment Schemes Order 2001 and regulation 3A of the Alternative Investment Fund Managers Regulations 2013. A transaction-linked reward is a different animal from a balance-linked one, and the rule draws the line there rather than at who pays it.

What gets published, and who signs

Quarterly disclosure. Annual independent review.

CRYPTO 2.5.15R sets the cadence as a floor: a firm must update, at least once every three months, the total number of qualifying stablecoins and the backing asset pool information. CRYPTO 2.5.22G confirms firms may go faster to align with other reporting, and CRYPTO 2.5.21G suggests they should consider it if they hold expanded backing assets.

The granularity is specified rather than left open. CRYPTO 2.5.27R requires the total value held, the values held as core backing assets broken down by type, the values held as expanded backing assets broken down by type, and each of those also expressed as a percentage of the total. CRYPTO 2.5.28G names the five types: on-demand deposits, short-term government debt instruments, long-term government debt instruments, units in a public debt CNAV money market fund, and assets, rights and money held as counterparty to a repurchase transaction. CRYPTO 2.5.29R adds a discipline that is easy to fail: the point-in-time selected must be the same for the token count and the pool value, and no more than 24 hours before publication.

Retention runs five years under CRYPTO 2.5.23R — measured “from the date it is no longer published”, not from publication — and copies must be provided without undue delay to any holder and, notably, to “any former holder in respect of the time when they were a holder”.

The assurance chain is where the made rules are considerably more specific than the policy statement, and where a firm planning its audit calendar should read the instrument itself.

1. A statement each quarter

   CRYPTO 2.5.32R: each time the firm updates under CRYPTO 2.5.15R it must prepare a statement confirming whether the pool complies with CASS 16.2.1R(3), have it approved by the governing body or an appropriate senior manager, and publish it.

2. Reviewed annually

   CRYPTO 2.5.33R: at least once every 12 months, an independent review of the statements published over the previous 12 months.

3. First one is dated off the fourth statement

   CRYPTO 2.5.34R: the first review must take place “within 3 months of the date a firm publishes its fourth statement”. That is a hard, plannable date, and it is derived from the firm’s own publication history rather than a regulatory anniversary.

4. To a named standard

   CRYPTO 2.5.35R: an opinion “prepared in line with a reasonable assurance engagement” as to whether the statements were accurate. Reasonable assurance, not limited assurance.

5. By a qualified outsider

   CRYPTO 2.5.36R: a person who is neither an employee nor an agent of the firm, is not in the same group, and is eligible for appointment as an auditor under chapters 1, 2 and 6 of Part 42 of the Companies Act 2006, or under another enactment, or the overseas equivalent.

6. Published by the reviewer

   CRYPTO 2.5.37R: as soon as practicable after the review, the firm publishes a statement prepared by the reviewer giving the date, the overall outcome and the reviewer’s relevant qualifications.

Worth correcting a common shorthand. The reviewer’s qualifications are stated in the made rule at CRYPTO 2.5.36R and amount to statutory-auditor eligibility. They are not something a firm needs to go back to the consultation paper to find.

What the FCA thinks it costs

The regulator published its own numbers.

The aggregate cost benefit analysis covering PS26/9 to PS26/13 carries two cuts that matter here. Table 6, at paragraph 111, aggregates costs across the stablecoin issuer population and puts the ten-year present value at £17m. Within it, managing the backing asset pool accounts for £2.5m and providing next-business-day redemptions for £3.2m — the two lines this page is about. Familiarisation is £50k per firm; prudential requirements, at £10.3m, are the largest single line.

Table 16, at paragraph 126, is a hypothetical worked example of a single stablecoin issuer: £1.9m transition costs, £0.6m ongoing, and a ten-year present value of £8m. The FCA labels it a hypothetical example of a composite firm. It is not an observed cost and it is not a per-firm average. Quoted without that qualifier it will not survive a reader opening the source, which is the only test that matters.

Chapter 11 of PS26/10 gives a sense of how the FCA sees the market. It revised its expected UK stablecoin issuer population upwards “from 10 to 25 firms”, citing 20 applications to the regulatory sandbox in November 2025 and noting that as of April 2026 ESMA lists 38 stablecoin issuers authorised under MiCA. It raised assumed familiarisation cost from £11k to £50k per firm, on the assumption of “a legal/compliance team of 4 staff reviewing the necessary legal text”.

One number sets the scale of everything above. At paragraph 110 of the cost benefit analysis the FCA records that “currently there is only one fiat-referenced stablecoin issuer located in the UK”. This is a rulebook written for a population that does not exist yet.

What is not settled

What the made rules still do not answer.

Saying what a document does not contain is more useful than pretending it is complete. Reading the instruments rather than the policy statement closed most of the questions this piece started with. Two remain.

1. The insolvency waterfall

   CASS 16.5.4R(3) reads “[to follow]” in the made instrument, with the terms applying on firm failure deferred to a later consultation. This is the largest open question in the regime, and it is open on the face of the rule.

2. Where redemption day is defined

   The operative mechanic is clear — the firm declares its redemption days in its liquidity risk management policy under CASS 16.2.17R(1)(b). The Glossary definition is not in the instrument bound into PS26/10, and we have not traced which of the other instruments makes it.

For completeness, three questions this piece previously carried are answered by the made rules and are no longer open: the valuation basis and daily cut-off, at CASS 16.2.6R; whether T+1 tests placement or settlement, at CRYPTO 2.4.18R and 2.4.19R; and the qualifications required of the independent reviewer, at CRYPTO 2.5.36R.

What this is not

This is not advice.